U.S. Education Department to Resume Student Loan Collections on Defaulted Borrowers Starting May 5
Date: 22-apr-2025 | By: Nuztrend Team
Photo by Zoshua Colah on Unsplash
On April 22, 2025, the U.S. Department of Education confirmed it will resume collections on defaulted federal student loans beginning May 5. The move marks the end of a five-year pause that began in March 2020 under emergency pandemic relief efforts.
The change affects approximately 5.3 million borrowers currently in default, many of whom have not made payments or faced penalties since the start of the COVID-19 pandemic.
What Borrowers Need to Know
Starting in early May, the Education Department will reintroduce collection measures including:
- Treasury Offset Program: The government may withhold tax refunds and federal benefits, including Social Security, to recover unpaid student loans.
- Wage Garnishment: Up to 15% of wages may be garnished for borrowers who do not respond or resume repayment voluntarily.
Borrowers will begin receiving notifications and outreach from the Office of Federal Student Aid, urging them to explore options such as income-driven repayment plans or loan rehabilitation programs to avoid penalties.
Government’s Rationale
Education Secretary Linda McMahon stated that restarting collections is essential to protect taxpayers and preserve the integrity of the federal student loan system. “We are offering pathways for borrowers to become current on their loans, but we must also ensure accountability,” McMahon said.
Criticism from Advocacy Groups
The decision has drawn backlash from borrower advocacy organizations. Groups like the Student Borrower Protection Center argue that restarting collections during a time of economic uncertainty could disproportionately harm low-income borrowers.
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“This is a dangerous move that could push millions of Americans deeper into financial distress,” a spokesperson said. “There are better, more humane solutions than wage garnishment or seizure of tax refunds.”
Borrower Options
Borrowers in default still have options. The Department encourages individuals to:
- Apply for loan rehabilitation to bring their loans out of default.
- Consolidate their loans and enter into a new repayment plan.
- Contact their loan servicers to discuss alternative repayment options.
Resources and assistance can be accessed through the official site: studentaid.gov
Source: U.S. Department of Education
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